Money Under 30

High Yield Savings Accounts Compared

Where should you stash your money while you’re saving up an emergency fund, new wheels, or a down payment? Today, online savings accounts provide returns with interest rates far better than local banks. Plus, unlike other investments, these high yield savings accounts are FDIC-insured up to $250,000.

In this review, I take a look at the leading online high yield savings accounts in the U.S. to help you decide where to put your pennies.

Ally Bank

• Earn 1.55% APY (As of 11/06/2009)
• No minimum deposit or balance
• No monthly fees
• Open an account now »

HSBC Direct (Recommended)

• Earn 1.35% APY
• No minimum deposit or balance
• Transfer money to and from any bank account
• Open an account now »

ING Direct (Recommended)

• Earn 1.30% APY
• No minimum deposit or balance
• Save for specific goals with up to 30 sub-accounts
• Open an account now »

WTDirect

• Earn 1.51% APY on balances $10k +
• Get highest level of customer service
• No minimum to open
• Open an account now »

Interest Rates

These high yield savings accounts frequently change their interest rates to keep in line with the federal reserve benchmark rate; they may also change their rates for competitive reasons. When you open a high yeild savings account, your interest rate is variable, not fixed, meaning it will go up and down with the market. After more than three years of tracking these accounts here, it’s important to note that the banks with the highest rates today may not be tops tomorrow. That said; HSBC Direct has consistently had the highest or second-highest interest rate that does not require a minimum balance.

While a leading interest rate is important, don’t forget to consider other factors. For example, if you want just a savings account to stash some money and forget it, HSBC is a great option. If you may want to access CDs, free online checking, stock trading, and home loans, Ally and E*Trade are better fits.

ATM Access

ATM use is a major feature offered automatically by almost all of these high yield savings accounts, but most charge a fee for withdrawals. With all of these high yield banks, however, you can withdraw your money anytime for free; it just takes a few banking days to reach your checking account. Especially for those using a high yield savings account as an emergency fund, ATM access to cash is a major perk and might be worth the couple of bucks it costs to use.

Checking Accounts

E*Trade offers an optional high yield checking account, and ING offers the great, free Electric Orange checking account that comes with a free MasterCard Debit Card.

Both give you free bill payer, and E*Trade even gives you free check writing. (With ING, you can send paper checks in the mail, but don’t get a checkbook). How can these banks provide free, interest-bearing checking? There are no branches, and no paper statements, saving the banks big bucks that they are able to funnel back to customers.

Other Considerations

Aside from a good rate and easy access to your cash, what else should matter in a high yield savings account? Personally, I cherish simplicity. The easier an account is to open, manage, and link, the happier I will be. Forrester Research gave ING Direct a lot of points in this category back in 06—from their account demo to their simple automatic savings plans—but I think competitors have caught up with ING, who has been around the longest.

I hope you find this comparison useful in choosing a high yeild savings account. I am keeping this review page up to date with the latest rates and account features as I get them, but please remember to double check each bank’s terms before you apply. In sum, if it is purely a high interest rate you are after, Ally Bank currently offers a great no minimum balance rate of 1.55%. For personal service, choose WTDirect.

Happy saving! Go back to the top of this review, or open an account now:

• WTDirect Savings Account
• Ally Bank
• HSBC Direct
• ING Direct